Sterling gives up two-week high ahead of the British budget release

Sterling declined in European trade on Tuesday against a basket of major rivals, moving away from two-week highs against the dollar on profit-taking while investors shun risks ahead of the release of the UK general budget for 2024.

The budget will stipulate government spending, expected income and borrowing, and targeted investments. 

GBP/USD

GBP/USD fell 0.15% to 1.2673, with a session-high at 1.2695, after closing up 0.3% on Monday, marking a two-week high at 1.2707. 

The 2024 Budget

Tomorrow, the UK finance minister Jeremy Hunt will announce the details of the general budget for 2024 with all spending, income, and borrowing detailed. 

Hunt will likely calm down concerns about big tax cuts before general elections, and will likely announce a positive financial outlook for the economy.

Estimates 

Barcly’s strategic experts said there could be some stimulus measures in the 2024 budget, but they won’t offer much support for the pound. 

Societe Generale Bank analysts note that such financial events usually don’t move the pound, unless the borrowing and spending estimates cause an unaccounted for reaction in government yields and Bank of England interest rates. 

The analysts believe that the sense of financial responsibility was restored with Prime Minister Sunak and finance minister Hunt, which led to lower government bond yields and lower debt service costs. 

What stimulus measures are contained in the budget will be aimed at boosting consumer spending and economic performance, but could risk maintaining inflation higher for an extended duration.